Finance Plans

Hire Purchase is a financial arrangement where an individual or business can acquire a vehicle by paying an initial deposit followed by regular instalment payments over a fixed period. The purchaser effectively hires the vehicle from the seller until the final instalment has been paid, at which the ownership is then transferred. Until the final payment is made, the seller retains ownership of the vehicle. Once all payments, including any interest, are completed, the purchaser gains full ownership of the vehicle.

 PCP stands for Personal Contract Purchase. It is a type of vehicle finance agreement that involves paying a fixed monthly payment over a set period, typically two to four years. At the beginning of the contract, the individual pays an initial deposit, followed by monthly payments covering the depreciation of the vehicle over the contract term, plus interest. At the end of the agreement, the4 individual has three options:

1. Return the Vehicle: The individual can return the vehicle to the finance company, assuming its in a good condition and hasn’t exceeded the agreed-upon mileage limit.
2. Purchase the Vehicle: The individual can choose to buy the vehicle outright by paying a final lump sum, known as the ‘Balloon Payment’ or ‘Guaranteed Future Value’ This final payment is determined at the beginning of the contract.
3. Part Exchange: Alternatively, the individual can use the vehicle’s value as part-exchange deposit on a new PCP agreement for a new vehicle.

A Finance Lease is a type of lease agreement where a business (the lessee) leases the vehicle from the lessor for a specific period. Unlike traditional ‘Business Contract Hire’, finance lease transfer substantially all the risks and rewards associated with ownership of the vehicle to the lessee, effectively treating the lease as a purchase for accounting purposes. In a Finance Lease:

1. Ownership Transfer: While legal ownership usually remains with the lessor throughout the lease term, the lessee is typically responsible for maintaining and insuring the vehicle as if they were the owner.
2. Fixed Payments: The lessee makes fixed periodic payment s to the lessor over the lease term, which covers both the cost of the vehicle and interest component.
3. Option to Purchase: At the end of the lease term, the lessee may have the option to purchase the vehicle at a predetermined residual value, often referred to a ‘Barain Purchase Option’.

• In BCH, a business leases a vehicle for a fixed period, typically two to four years, paying a fixed monthly rental fee.
• The business doesn’t own the vehicle and returns it at the end of the contract., usually without an option to buy.
• Service, maintenance and repair (SMR) can be included in your monthly payment.
• VAT registered businesses can usually claim back 50% of the VAT on the monthly payments and 100% on any service and maintenance option (SMR) making it tax efficient.

• PCH is similar to BCH but for individuals rather than businesses.
• Like BCH, individuals lease a vehicle for a fixed period pay a monthly rental fee.
• Service, maintenance and repair (SMR) can be included in your monthly payment.
• At the end of the contract , the individual returns the vehicle with no option to buy.